Front-end loading is a workflow designed to ensure we deliver the right project. At its core, it is all about preparation, creating clarity and understanding about what we are trying to achieve. In order to ensure successful project delivery, on budget and on-time, it is critical that the appropriate planning is performed from both a technical and commercial point of view and takes account of a myriad of non-technical risks. To this end, the early project phases are absolutely critical. It is where vital decisions are taken on strategies and concepts that set out how Maersk Oil can maximise the value of its projects throughout their lifecycle.
Influence is greatest early on
While early planning has always been a critical part of project management, front-end loading (FEL) has over the recent years evolved into a key concept in the oil and gas industry. As large scale projects have been brought forward and executed, research and project learnings have increased the awareness and understanding of the fact that during the earliest project phases companies have the greatest ability to influence the end result including cost, execution and ultimately project success.
Front-end loading refers to performing fit for purpose work in the early project stages to define and scope a project. It is by no means a new concept; but it was first coined and formally introduced to the sphere of project management by Edward Merrow the founder and president of Independent Project Analysis Inc. (IPA).
In Maersk Oil, front-end loading is first and foremost connected to the company’s Project Maturation Process (PMP). More concretely it is embedded in the first three stages of the process, Assess, Select and Define. It applies to all the work leading up to a project being sanctioned and is also applied to our assessment of growth opportunities through Business Development and Exploration.
A project is no better than its planning
“FEL is much more than a three letter acronym. It is a real workflow built on extensive research and statistics. There is a proven correlation between project success and the extent to which project teams have managed to front-end load,” explains Glenn Brown, Vice President Corporate Subsurface. He continues, “The whole essence is to understand and influence the key value drivers of a project when you still have the ability to influence but are yet to commit to large-scale costs and underlying commercial frameworks.”
Effective early planning helps create value that is realised through improved decision and execution quality. Later project phases are where value is actually realised through effective project management and delivery of the selected concept.
Maersk Oil saw its focus on front-end loading as a result of the 2012 introduction of the PMP process. “We saw project teams becoming better equipped at developing business objectives, assessing success criteria and identifying alternatives. We have also become better at evaluating those trade-offs, through the help of standardised approaches, toolboxes and workflows,” says Brown.
Maersk Oil also uses external benchmarking in its major capital projects, to assess project readiness, including specific success criteria for FEL. Using the extensive IPA database to compare Maersk Oil to other operators in similar projects in similar geographies we identify any shortcomings where additional work is needed to close them. So far the IPA benchmarking results have been extremely insightful, and the ability to compare Maersk Oil to other operators helps to identify how further improvements can be secured.
Maersk Oil has a strong focus on front-end loading (FEL). It refers to performing fit-for-purpose work in the early project stages (Assess, Select, Define) to define and scope the project. FEL helps to ensure the full value is realised when the project is executed.
Incorporating the commercial aspects
The upstream industry has traditionally over-stated technical considerations at the expense of commercial, political and social risks. These can engender significant cost, and have a clear influence on project success. Indeed, a research paper for Goldman-Sachs concluded that “73% of project delays and cost overruns are usually due to above-ground risks.”
Matthew Wilks, Chief Commercial Officer observes: “What is needed for successful project execution is mandatory and wide framing sessions, clearly defined deliverables and holistic project plans that encompass both the technical and non-technical dimensions. It is absolutely critical that non-technical aspects are incorporated and evaluated early. FEL provides the organisation with the capability to speed up project processes. It is incredibly useful in quickly identifying risks, potential show stoppers and no-go decisions.”
The principles of FEL must apply and be carried through the full life cycle of a venture all the way to abandonment. Understanding and incorporating these at the earliest stage of the lifecycle is vital to protecting the full value of a project.
“The commercial architecture and above ground risks have to be addressed at the outset of the project or venture in question and continually reassessed throughout its lifecycle. Trying to change an operating agreement to cater for a missed or misunderstood above-ground risk is much more difficult than thinking ahead at the outset of the project,” says Wilks.
Reaping the benefits
Maersk Oil has benefitted from the approach in many recent and current projects. Glenn Brown sees a stand-out example in the current portfolio.
“The Culzean project team has developed into a fully integrated team - including the non-technical side, and because business and project objectives have been clearly defined and communicated the difference is tangible and measurable.”
Benchmarking performed by IPA supports this. It shows that integrated teams have better outcomes in all main project dimensions, including project costs, execution schedule, production attainment, operability.
Brown cites an everyday parallel: “When you are buying a house you explore all relevant questions upfront before you submit a bid, leaving as little room as possible for surprises. In a similar manner the front-end loading of an oil and gas project needs to appraise all relevant technical, as well as, non-technical aspects.”
Front-end loading sees close alignment with the Maersk company values - in particular that of constant care. Constant care can easily be applied to forward thinking, planning and execution, and how you ensure timely and appropriate attention to detail at the appropriate level of the organisation. It is a balancing act to determine investment appetite for a project early on.
Looking ahead, Maersk Oil has an ambition to improve capabilities within early planning. Wilks points out: “There is a clear commitment from leadership, and it is evident that we are becoming better at making informed decisions earlier.”
The combined effort between the technical and commercial parts of the integrated project teams will ensure that the company is well positioned to do so.